1998 (3) TMI 693 - Board - Companies Law

Summary

Issues Involved:
1. Parallel Proceedings
2. Membership Qualification under Section 399
3. Prior Petitions under Section 111
4. Delay in Filing the Petition
5. Refund of Amounts Paid for FCDs

Issue-wise Detailed Analysis:

1. Parallel Proceedings:
The company argued that the petitioners had already initiated legal proceedings in the Calcutta High Court on the same issues and obtained interim relief. Thus, they were prosecuting parallel proceedings, which is not permissible. The petitioners countered by stating that they had decided to withdraw the earlier proceedings, making this objection irrelevant.

2. Membership Qualification under Section 399:
The company contended that only two of the four petitioners were registered members of the company, holding a negligible percentage of shares, and thus did not meet the qualification criteria under Section 399 of the Companies Act. The petitioners argued that the cancellation of allotment was invalid and that they should be considered shareholders, thus meeting the requirements of Section 399. The Board noted that the primary condition of Section 399 is that petitioners should be members of the company as per Section 41, which requires their names to be entered in the register of members. Since the second and third petitioners' names were not in the register due to the cancellation of shares, they did not satisfy this condition. The Board referenced the Gujarat High Court decision in Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel, which held that a person must be a member before complaining of oppression.

3. Prior Petitions under Section 111:
The company pointed out that the petitioners had already filed petitions under Section 111 before the Eastern Bench of the Company Law Board regarding certain shares. Therefore, allegations concerning those shares could not be examined in the present proceedings. The Board did not address this issue in detail, as it focused on the locus standi and qualification under Section 399.

4. Delay in Filing the Petition:
The company argued that there was an enormous delay in filing the petition since the annulment of the allotment occurred over a year ago. The Board did not specifically address this issue, as the primary focus was on the maintainability of the petition based on membership qualifications.

5. Refund of Amounts Paid for FCDs:
The company argued that since the petitioners had been refunded all amounts paid for the FCDs, they could not be considered members of the company. The Board noted that the shares had been canceled through a public notice, and the petitioners had been refunded their money, meaning the prima facie evidence of share certificates was no longer available to them. The Board concluded that the petitioners did not meet the membership condition under Section 399.

Conclusion:
The Board dismissed the petition as not maintainable under Section 399, as the petitioners did not qualify as members of the company. The Board vacated all interim orders and made no order as to costs.